As the new government seeks to restructure the financial supervision system, the Bank of Korea has argued for an expansion of its authority. The Monetary Policy Committee, which is the decision-making body of the Bank of Korea, asserts that it should hold key regulatory powers, including the primary financial regulation decisions and the authority to inspect financial institutions, which belong to the Financial Services Commission and the Financial Supervisory Service.
According to the Bank of Korea and others on the 12th, the Bank of Korea recently conveyed a policy reform plan to the Presidential Committee on Policy Planning aimed at reinforcing its role within financial stability-related organizations and maintaining macroprudential policy tools. While it is necessary to promote price stability and financial stability, they argue that outside of interest rate decisions, there are no tools to respond to financial instability.
The Bank of Korea also emphasized to the Presidential Committee that central banks in major countries not only establish and implement macroprudential policies directly but also have microprudential supervisory authority or play important roles in financial stability consultative bodies.
In addition, the Bank of Korea has demanded regulatory authority over credit, capital, and liquidity, as well as the exclusive right to inspect financial institutions. The former includes the authority to determine regulatory decisions on the debt service ratio (DSR), loan-to-value ratio (LTV), countercyclical capital buffer (CCyB), systemic risk buffer (SRB), and liquidity coverage ratio (LCR), which are currently held by the Financial Services Commission.
The latter refers to the authority to inspect financial institutions such as banks, securities firms, insurance companies, and credit card companies. Currently, the Financial Supervisory Service conducts inspections, while the Bank of Korea can only request joint inspections from the Financial Supervisory Service. The Bank of Korea's request goes beyond merely resuscitating the bank supervisory authority it held prior to the foreign exchange crisis; it also seeks to add non-bank supervisory authority.
The Bank of Korea also proposed that the governor of the Bank of Korea chair the financial stability consultative body among related organizations. It cited that the chair of Australia's financial stability consultative body, the Council of Financial Regulators (CFR), is the central bank governor. It also suggested that the vice governor of the Bank of Korea be included as an ex-officio member of the financial supervisory decision-making body, and that a financial expert recommended by the governor be added as a permanent committee member.
After the Monetary Policy Committee's currency policy direction meeting ended on the 10th, Governor Lee Chang-yong met with reporters and stated that "a governance structure must be established so that the Bank of Korea can firmly implement macroprudential policies without political influence."
He noted, "I believe we need to strengthen the joint inspection and investigation authority over the non-bank sector," adding, "This authority should be improved not for vested interests but for the country's economy."